Posted by dealmaker on February 07, 2007 at 08:34:41:
Yes, but if you seller finance it you’re not going to collect much gain in any one year.
Let’s say you sell the house for $300K with a $100K gain and you get cash. You put the $100K in your pocket tax free and go on your merry way.
Now, same scenario but the buyer puts down $10K and you take a mortgage for $290K. You put the $10K in your pocket tax free. Then each year you collect payments representing part earned interest, part gain and part return of capital.
The only thing you pay tax on in those years is the interest. The return of capital was already yours and the gain is still tax free you’re just collecting it in the future. If the buyer pays it off or refinances in 3 years you’ll get all your money then and your gain is still tax free.
Do you really want to become a bank? It’s sometimes harder than being a landlord! I’ve been doing it for 12 years or so and I do it because I can get AT LEAST 15 PERCENT MORE FOR THE HOUSE AT SALE TIME, and I charge a higher than normal interest, averaging about 10% now.
With those rates I’m selling to “sub-prime” borrowers so I know I"m going to have some collection and foreclosure problems. I don’t worry about them, they’re a cost of doing business and this is the business I’ve chosen. But it’s not for everyone, in most cases (every case if I’m getting the gain tax free!) I’d take the cash and be happy.
dealmaker